This week, Lauren lists her top 5 tips for managing your money, including setting achievable financial goals and how to "pay yourself first".
1. Set financial goals
Setting financial goals - particularly small, achievable financial goals - can help you to achieve what you want more easily. For example, if your ultimate goal is to buy a property, then you could set small financial goals related to this, such as clearing a credit card that you've had for a while, or saving up for the deposit. You could even break down these goals even further, so - if you're saving for a deposit - you could divide that into small increments by starting to budget.
There are a host of handy tools and websites that can help you to budget, including apps that you can have on your phone - such as the apps Money Dashboard or Emma - which can help you whether you are new to budgeting or just to have a look at where exactly your money is going each month. You should be checking your bank accounts regularly already, but also try to have a look to see precisely where the money leaving your account is going, particularly if you have a lot of direct debits and standing orders. You could potentially be paying for something that you don't realise you had signed up for and you could easily save yourself money by cancelling some of those subscriptions.
3. Pay yourself first
Paying yourself first means, as soon as you get paid, set up a payment to yourself - either for savings or for clearing debt - and treat it as a bill. In some previous Millennial Money episodes, I’ve shared some tips about how to clear debt and how to save for a house deposit, and I’ve used these tips to manage my own finances. For example, when I was clearing my credit card debt, I treated my credit card payment as a bill and moved over a set amount each month to clear off my debt. I also used to move another amount over into my savings. So, at the end of the month, I would work towards clearing the credit card debt by treating it as a bill and moving it out of my main account. Therefore, paying yourself first allows you to work towards achieving one of your goals. But, the key is to do it at the beginning of the month, because often you’ll find if you don't pay yourself when you first get paid, you’ll probably have spent that money elsewhere by the end of the month.
4. Are you protected?
You should be checking if you are suitably protected. Do you have the right insurance policies in place now? Some insurance policies may not be relevant to everyone, but for example, if you do have a house or you've recently started a family, do you have a life insurance policy in place to protect you and your family in the event of your death? There are other important personal finance products out there to consider, such as income protection insurance, which can help you if you are unable to work due to illness or injury. We have a host of articles about the different types of personal insurance - such as life, income protection, and health - so be sure to go and check them out to work out if you need to get any.
5. Take Damien's Money MOT
This is the quickest and easiest way to get on top of your finances and develop an understanding of which areas of your finances you need to focus on first. Head over to Damien’s Money MOT, where it takes just two minutes to answer a few questions about your personal finances. You’ll receive a grade telling you if your finances are in good working order, and highlighted areas that you may need to improve on. You can then take it one step further by signing up to Damien's free Action Plan, which will show you how to take the next steps to be able to improve those areas.